BANKER bashing has been a popular pastime since the financial crisis. But even before the credit crunch hit in 2007, there was a feeling that the good times couldn’t last forever. Animosity towards bankers and their astronomical bonuses was already starting to brew, as each and every year across the first decade of the new millenium, pay for the dealmakers got higher and higher.
Today, and maybe because every one of us has a monetary interest in two of the UK’s biggest banks, the bash-a-banker mentality has barely changed. It seems to make a good headline whenever something goes wrong, especially if it’s at Lloyds or RBS.
Yesterday, however, saw one of the few good bits of news from the sector, as Lloyds Banking Group’s first quarter results came out. These were a huge improvement on a year ago, and it finally looks like the payment protection insurance scandal is slowly becoming a thing of the past. This particular issue has run on for long enough, and really should be put to bed. But there are other signs that the banks may be finally turning a corner. If you look at Lloyds’s share price, you would certainly believe so. It has risen over 80 per cent in the last 12 months, and is tantalisingly close to the magic 62p – the level at which the government would break even on its bailout of the bank. It’s little wonder that there’s so much talk of the coalition selling our stake in the next 18 months.
Banks are being (and have been) transformed over the past few years, and their recapitalisation has made them a little safer – even if it’s been at the expense of lending more to the wider economy. Banker pay has also been reformed dramatically. Maybe it is time to bash them less, but at the same time ensure that they continue to improve the way they work and communicate with the wider public.
The most important thing from the financial services point of view is that other areas are not tarnished with a similar brush. There’s been increasing scrutiny directed at the asset management world, which now seems to be falling into the hands of European politicians who want to cap (sorry – I mean “reform”) pay in the sector. This seems to be little more than an attack on the industry as a whole, and London’s dominance for the provision of investment management – an industry that, since the introduction of the Retail Distribution Review in January, has now had its interests better aligned with the end customer than before.
By curtailing what people can earn and how services can be provided, politicians and regulators have to be careful that they do not drive business away from the UK. A great deal of attention has been placed on how important the emerging economies are becoming. But we mustn’t forget how important our existing big trading partners are, for instance the US. When the economy remains as fragile as it is, the financial services sector needs as much support as it can get. After all, as we get closer to retirement, we will become more reliant on it to provide for us in the future.
Angus Campbell is head of market analysis at Capital Spreads. You can follow him on Twitter @angusjmcampbell
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